Experts say Russian regions are rapidly becoming poorer

Sunday, June 18, 2017 7:00:37 PM

The growth of the Russian economy for the last three fiscal quarters at the federal level, which Rosstat (Russian Federal State Statistics Service) has been reporting about, is still not visible in most regions, Rosbalt.ru news website writes citing experts from Russia’s National Research University Higher School of Economics.

As reported in "Comments on the State and Business," nearly 60% of the territories of the Russian Federation are in a recession. This is the second month in a row that the economy continues to deteriorate outside the federal center. In April, the composite index of regional economic activity dropped from 49 to 47.1 points, showing a minimum value since December last year.

Only 12 subjects of the Russian Federation showed growth in at least four of the five key sectors of the economy. Conversely, a decrease has been observed in 18 regions, which account for one-third of the country's gross regional product. The most problematic regions are Novgorod Oblast, Chuvashia, Perm Krai and Buryatia, said Sergey Smirnov, Deputy Director of the Center for Development of the Higher School of Economics.

According to Smirnov, with such statistics it is ‘hardly correct’ to talk about the beginning of economic recovery. "The share of regions in which the growth in four or five sectors is happening, remains significantly lower than it should be during a phase of confident economic growth,” he explained.

Retail and construction were the first industries to be affected. Those industries focused on consumers whose income collapsed during the crisis. Their regional activity indexes fell to 39 and 41 points, respectively.

There is some growth in industry but it works mainly for export or on the basis of government orders.

"There are no obvious signs of acceleration. We can only talk about returning to pre-crisis stagnation, characteristic for 2013-2014," Smirnov stressed.

In December, the international rating agency S&P predicted that by 2018, every fourth Russian region could be on the verge of default. Already, the debt of every third region exceeds the critical level determined by the budget code, which is 50% of revenues.